consideration on this. >> thank you for your courage. i appreciate your wife being here also. dr. nichols i recognize you for five minutes. then a congressman buck, is my microphone on? congressman buck members of the committee thank you for the opportunity to appear today. during my career i worked with synthetic drugs possessing a researcher schedule one dea registration paid by goal was to understand how the structural molecule engaged a biological target us better understanding how these substances act in the brain that i'm very concerned about the potential harm to human health presented by synthetic drugs. their availability requires a response including regulation yet they do not believe the proposed legislation would have prevented the recent emergence of spice. rather they focus on already noncontrolled substance types. we badly need reasonable approaches to controlling new

types of synthetic substances. the challenge is to preserve researchers needs while stemming the flow danger synthetic chemicals and a proper response to consider three points. first allowing research of potential therapeutic uses, second legislation should be guided by rigorous science entered the impact on mass incarceration especially in cases where substances have not been fully vetted by the scientific community. few investigators will pursue research with schedule one drugs various researchers discourage engagement obtaining a schedule one licenses not a trivial matter and researcher must be motivated to obtain one even if the investigator requires small truck amounts that do not represent a potential for diversion in most cases researchers are funded for example by nida to study only the deleterious properties of a specific drug of abuse but is also important to have funding available for research identified beneficial properties of schedule one substance is as with recent medical marijuana. the cause of the burdens of

schedule one license that her research that might be to medicines. research on schedule one dose is important because the last decade of studies have indicated so still as i've been a schedule one drug may have unique therapeutic efficacy in treating anxiety depression and addiction to alcohol and nicotine. as an example professor charles nicholson goes he decided to study the receptor targets have a listen and jim's. the only hallucinogenic available to license license was called the wife who discovered by accident deal why his potent anti-inflammatory properties indicating potential efficacy in treating cardiovascular disease and asthma grade had dui been a schedule and he would never would have discovered this breakthrough. most pharmaceutical companies have abandoned research for depression and depression and bipolar disorders is that compulsive disorder and others others. given that causes the research is extremely expensive with a low probability of success but ironically the kinds of substances we are concerned with here today act in the brain is quite possible new medicines

will result from new research on them being responsible legislation should protect research that might lead to the discovery of new medicines. without solid scientific evidence that some eyes to schedule new molecules with untested potential. sometimes changing a single atom on a molecule can alter his pharmacology. superficial comparisons of chemical structured resemblance or predicted farm would -- pharmaceutical effects are not a reliable basis for schedule one classification. will be chen and effective antidepressant resembles annoyed there are hundreds of thousands of synthetic compounds that could be made and we know little about just a few of the most recent ones. there's no schedule category for drugs that have no known medical value but have not and shown with high potential. we should research compounds bye bye law forsman by scheduling those with the most. health and safety risk. the scientific medical community would conclude the schedule and compounds with no demonstrated

public health dangers are pending the list cars duration -- incarceration. person to manufacture and distribute these substances that harm human health should be held accountable for any people today do not believe in making users criminals. there's a consensus developing that use it up a psychoactive suffers as a public-health matter not a criminal matter but a one drugs has been unsuccessful and preventing drug use in the contribute to our country and the largest prison operation the world. a large percentage of them were cursory visit bristol the nonviolent drug offenses. the prohibition represents a great threat to the health of our youth and regulation must be a component of the solution to this problem. i strongly believe drug controlling scheduling decision should be granted investments should be grounded in that sense prevails balance between the needs of research and enforcement select potentially through pieces through reason i

i -- experiment that most passive as investors conference victor connie and felony convictions only at the problems. thank you. >> thank you dr. nichols. we will now proceed under the five minute rule with questions for the witnesses and i recognize mr. gohmert from texas. >> i think all the witnesses for being here. it's an important subject. and mr. eckhardt it's obviously very difficult for you. what a handsome young man and you and your wife had, obviously brought a lot of joy. you mentioned he bought it legally. did you ever find out how he heard about this and where he purchased it? >> connor was with a new friend that day. he had actually been offered --

can you hear me okay? >> they been offered marijuana. he declined. he did want that. he did want to be around it and as an alternative to synthetic drugs were suggested and they were purchased at a local smoke shop a lot with other tobacco products. i think truly it was viewed as a safe alternative. >> because it was legal. so it must be okay. >> it was legal and youth find themselves often in situations of peer pressure and you is declining one thing and it was a way to concede. >> he was acting admirably, relying on his government. it was too harmful it will -- it would be illegal obviously. and obviously as you and your wife have been raising awareness , if he had been aware

of the dangers obviously he was sharp enough and moral enough that he would have turned it down. he just didn't know the risks. mr. milione how big is the market for illicit prescription drugs compared to heroin? >> the market for prescription or listed are prescription opioids is massive. would be hard to put a number on it. if you put an overdose number we are talking 18,000 overdoses in one year of prescription opioids. with here when you have almost 9000 so if heroin is trending up you have a mass prescription opioid problem. >> is the opioids trending down or his heroin trending up? >> we don't see downward trend in prescription opioid abuse or

overdoses. that is trending up not equate the. that heroin is trending up but they are both trending up. carawan is affecting unfortunately on that graph. >> isn't it interesting is her federal government is forcing people to turn away from god, they are searching for answers in other places that are not so good for them. do you know what the profit margin for a kilogram of the synthetic cannabinoids is? >> it's a massive profit margin so for maybe $1500 or $1000 up to $2000 you can buy a kilogram of the synthetic substance synthetic cannabinoids and 13 kilograms of barstow leaf. you could turn it into $250,000.

that initial $101,500 a $200,000 in profit. >> dr. nichols he wrote and article in january of 2011 were you expressed remorse because someone had to use your public research to produce a substance that caused six deaths. how could they have used your article to produce that? did you go into that kind of detail? is hard to believe they could have taken your article. what is that? >> the situation is the chemist who was involved in making these substances are quite accomplished. i think many have ph.d.s so we published in the up and scientific literature. i've been doing studies of ecstasy's mechanism of action. when the compounds we have made was called mta and we used a red assay that identified compounds which cause release of a brain

transfer code called serotonin. it doesn't represent the effects of ecstasy that somebody apparently in the netherlands saw that paper we published and actually published a potential antidepressant when we looked at it. they saw we had made it great to synthetic ingredients are innate -- and ironic -- or wanted to put into is called flatlanders. i was really shocked because all medicinal chemistry working till published their work in the literature. if you work with mda lawsuits all out there in the methods are in the papers. just take someone you can mind that literature to find the kind of compound they want to work with. >> but you were not publishing the recipe. >> it's in the scientific location. >> but not in your article. >> not in the essay. >> i think you blame yourself too much for that but i perceive

the time and i yield that. >> the chair recognizes the ranking member from texas ms. jackson-lee. >> mr. chairman thank you very much. this is a very important hearing and i want to thank each of the witnesses. mr. milione and mr. smith, eckhardt and dr. nichols thank you so very much. i hope i pronounced that milione correctly. i was previously in a meeting and i will have to go to another meeting dealing with criminal justice but this is a very important hearing. let me thank the chairman as well mr. buck and the chairman of the subcommittee mr. sensenbrenner and the chairman of the full committee and mr. conyers the ranking member the full committee. i'm grateful for the work that we have done to organize this hearing in spring the use of abusive synthetic drugs to the attention of subcommittee previous several witnesses that will provide their own unique perspectives regarding the

effect and dangers of synthetic drugs but my home state of texas has been affected by the proliferation of synthetic drugs it is causing great harm. it's a designer drug made from a combination of synthetic chemicals sprayed on plant material packaged by candy smoked like marijuana. it has no constraint of regulations and no guidelines. bush is typically many times more potent than natural marijuana produces a physical and psychological effects that are uncharacteristic of natural marijuana use. people that use it have suffered paralysis brain damage heart attacks and even death. the supposed brand name for synthetic or one. law enforcement agencies across the nation identify hundreds of names given to synthetic marijuana priebus committee hearing is important for that reason that we need to get the facts. whatever we generate an legislation should be confined by the facts. we don't want to expand the fishnet if you will on

individuals who happen to be either attracted a dictator using this drug and i hope that we will have enough facts to be able to craft the sufficient federal response to this very important issue. mr. chairman i'm going to ask unanimous consent to rest my statement be included in the record. >> without objection. >> i'm also going to ask that my questions for the witnesses be submitted for answers to ask unanimous consent a mic questions submitted to the witnesses. >> without objection so ordered. >> i'm going to pose a question to dr. nichols. i'm concerned about making sure we are not so broad that we in fact do not appropriately respond synthetic drugs. and let me by the way in a moment of personal privilege my daughter graduated with honors from chapel hill so you are

elevated even higher in my site. why is it important dr. nichols that the scientific experts in the field of study synthetic compounds play role in determining the proper response in terms of drug scheduling and other controlled measures? .. i've seen some of the proposed bills and they basically try to think of everything possible. one of the comments i made his

we are talking about , but what if a new type of drug hits the street? there is no legislation that would take care of a new phenotype. some chinese chemist plays around and the lab and find something we have never seen before, and we have another scourge. the laws proposed are hindsight laws. if all you have is a hammer, everything looks like a nail. we need out-of-the-box thinking in terms of waste approach this that would cut off the possibility for new chemo types that we have not seen and be more careful in circumscribing the things that we have using expertise. there is lots of expertise in the american chemical society and pharmacology society that can save these are problems, these need evidence. rather than casting a wide net. many are not even harmful to human health. it is kind of an unfocused shotgun approach.

there is no focused shotgun approach >> i know the other witnesses will have some instructive information that i will draw from your answers. we just had a successful set of legislative initiatives on opioids. it was based on a lot of thought and a lot of hearings. opioids, and it was based on thought and hearing, a series of 18 those last week that all of us can find satisfaction with in the way it was approached. the judiciary billet not have any mandatory at all. i want to make sure we are we're accurately and appropriately addressing this problem, and i will take a very puzzling your astute analysis doing with the vastness of compounds

that subsets to make sure we narrowly address these poisonous drugs and not have a wide reach. with that thank you and i yield back. appreciate your time. >> thank you. i now recognize the gentleman from michigan, mr. bi. >> thank you mr. chair and to the witnesses were being here today. iwant to particularly thank mr. eckert and veronica for being here today for your testimony. they many of the folks in this room, i am a parent. i have a 16 -year-old son in the 1418 -year-old. this issue causes me great agony. for you,agony. for you, my heart goes out to you and your wife. pray for you and your family, for what you have been through.

i thank you for your courage to be here. it is incredible what you are doing. i intend to take your message back. i wonder if you might share with us what you believe is the most effective method of raising awareness. >> thank you so much for having us here. obviously is very difficult. we are passionate about the subject. obviously needs to change now. getting a public service announcement now happening with the opiate and heroin epidemic, getting public service announcements out there, recognizing that

these products are available and candy form, liquid form, getting that message out there, they simply do not know. full stories, full stories from people who lost their children out of to death or mental illness. people simply don't know. teachers need to know, nurses even out,now, counselors need to know. this is something that can be done immediately. awareness, education prevention. thirteen, 14, 15, in addition to spice, there is not a place that your child to get treatment plan this is a very serious issue.

>> appreciate your testimony. i wonder if you might be able to address this. kaytoo was an issue not too long ago. hit theago. hit the stores. it was in the local gas station. got a call from one of my local police chiefs who told me that he was trying to get it off the shelf but could not do it because there was no legal authority to. how do we get ahead of this? what do we do to prepare for the next generation, clearly these folks that are selling it in stores are selling with knowledge that it is

being used in an illicit way. it is being used by our youth. a way that is intended for some sort of five. how do we get ahead of this? what can we do to help give you the tools that you need? >> thank you for the question. as i mentioned before, we identified hundreds of based on theory that overdoses, deaths, law enforcement encounters. they are talking dozens. the most effective way is to get them in the schedule one. that would solve a couple problems. stop with the border but more importantly for increase the cost of those that are trafficking in it, not using it, trafficking in it. they operate with impunity.

another possible solution would have to do with that labeling. there is a bill that as to have appropriate labeling. these kinds of false labeling. so those are couple ideas. more than happy to work on providing any technical assistance in that area. >> getting the word out on the street. i believe it was spoken to the fact that these kids are buying this legally in stores. again, thinking it is illegal substance. they're not doing the articlehard core street drugs we used to see them do. they are not taking this out

>> thank you both very much. anything i can personallyi can personally do, and i know others in the same way. >> thank you. >> the controlled substances act provides for two mechanisms for controlling. congress can do it legislatively for the dea in collaboration with the department of health and human services can do it administratively. when the da takes an action we begin selling new versions of the products with new unregulated compounds in them. inthem. in your opinion how effective is the current legislative framework?

>> certainly we appreciate the tools. it is a reactor process, resource intensive process. also travel the country, 65 prosecutions as experts. so it is a very reactive process. it takes an average of three to four months after harm has already occurred. once we initiate the process, it is generally two to three years by the time hhs can do their analysis. so when you pile on top the dozens we are getting every year i'm on top of the hundreds we have already identified, it is like pushing that proverbial massive rock up the hill. to what should congress due classify >> --

i would be willing to provide advice to streamline that processor give us some breathing room. many of these synthetic drugs have been labeled as not suitable for consumption. what can be done about this? the evil brilliance of some of the traffickers. they are going to create something and put something on the substance to create a defense for them. now you have a battle of the experts when you prosecute them under the analog act. one way that you could potentially fix that is if you had some kind of a labeling requirements so that they are appropriately labeled. that would defeat that defense.

assistance or advice. >> the majority of been manufactured and imported from china. what has been done to combat these chemical compounds? >> trying growing relationship with the republic of china. the scheduled 116 new psychoactive substances, synthetics and as a result they provide leads to identify domestically. >> in our chemicals are being imported.

>> there being labeled as research chemicals, like any other contraband, mislabeled.contraband, mislabeled. we'll have the authority to stop them. the majority of them are not scheduled. >> officer smith, in the past several years they're has been an enormous increase in the variety and number of synthetic drugs available. the effect of the drunks can vary greatly, as a 1st responder what additional precautions to police officers have to take when approaching an individual suspected to be under the influence of synthetic drugs? >> ma'am, from a law enforcement 1st responder stand point law enforcement priority ms dealing with individuals of synthetic drugs is similar to the

effects of the cpm individual. they are very unpredictable to deal with. they can be very passive one moment and with the flick of a light switch are extremely agitated, violent, and the officers and firefighters and ems responders. >> thank you. i yield back. >> thank you. >> and i willi will yield back one or two minutes to mr. bishop. >> thank you. i wonder, thousand questions a small a lot of time but i wonder if i might ask, the dea project synergy found that millions of dollars in sales of synthetics were being funneled back to the middle east. what i assume to be terrorism purposes.

can you comment? >> it was a multi- year multi agency investigation, and you're right, hundreds of millions of dollars in proceeds were going back to the middle east, yemen, syria, lebanon. we continue to explore that with our partners. but that operation resulted in the seizure almost 7,000 kilograms of cannabinoids in the number of successful hundreds of prosecutions, we are still exploring that. i would not be able to speak to some of the throats of those investigations. >> one quick follow-up. they know that this is not necessarily manufactured here. in many cases it comes from china. how is the trafficking handled when he gets to the united states?

cartels,. >> well, on both the synthetic cancannot broadside on the fentanyl analog, the much more important than heroin synthetic there are several ways, but the primary is manufactured in china, sent to mexico, mexican cartels are exploiting in capitalizing on the opioid epidemic with the heroin trafficking and taking the synthetic pheromone and mixing units in the across the border, careers taking it into massachusetts, really every part of the country is being touched. you can also get directly from china, you can mix it with other compounds and distributed. it is a terrible, treacherous world that we are creating. >> thank you for your testimony. >> thank you.

i have all the challenge for calling a hearing. i want to express, i have five children and cannot imagine what you're going through and want to express my deepest condolences to you, your wife, and your entire family. i am sure it is difficult to be here testifying, but i greatly admire the courage you have to help us to more fully understand the true impact of these drugs are society. want to follow up on the questions being asked. to your knowledge is dea working with customers border to interdict the shipments? >> as closely as we can. absolutely. >> cooperative agreements in place. >> i don't know. there is a healthy working relationship. >> and you think it is

functioning? >> i believe so. >> the number of synthetics that has occurred? >> i'm sorry? >> estimate the number of prosecutions? >> it would be hard to come up with a hard number. >> okay. mr. smith, paul has the department had to shift the drug enforcement. >> the combining of synthetic drugs is typical enforcement of any other law. it's ever-changing chemical makeup of the synthetic drugs for prosecution.

just tweaking one chemical out of changes the enforcement aspect on law enforcement. a chemical drug that was not actually scheduled. they change in adam. it is now a new chemical. >> is anything you have not been able to tell us? >> how much time do you have? one of the things that occurs to me, how a price tag? hello price tag changes being made or delayed? from a parent's perspective, the general public's perspective we would feel like in the many hundreds of thousands of people we have communicated with would feel like if something looks like

a duck, walks like a duck,. >> ,. >> like a duck let's call it a dog. your down at the molecular adam structure, and because they change one molecule and skirts our laws and is available. how many young people have to lose their lives to death or permanent disability, the impact of the community and society as a result the ability to researcher talk about them were study trends and statistics. let's do something. i think parents and the general public need to be informed. they had no idea. we talked to our children about drugs. we do not have a clue about what is going on. the more we learn the more terrifying it gets.

we need help from our government. >> thank you, i yield back. >> i think the gentleman. the chair recognizes the children of the full committee. >> thank you, and i apologize for nothing able to be with you for the entire hearing. i appreciate your testimony and this brochure. i have in my experience seen a few other people who basically dedicated their lives to try to make it there someone offers life meaningful, and another that is exactly what you are trying to do in dealing with a horrific loss, like you are. i very much commend you. i don't know how much of foundations research has given you,you, but it may have been asked already.

some of these products like regular commercial products. that increase, i'm sure, the opinion that this must be legitimate. what do you know about this companies? is a legitimate companies that make our products, or other just totally illegal operations that have this stuff mysteriously appear in various stores for people to buy? >> to the best of our understanding there is no legitimate use the chemicals the businesses these products in the marketplace are not selling. >> just disappear into thin air. >> try to discover it was the manufacturer.

there is a deep web and it is not easy to go. >> made in the u.s. army outside? >> how much cooperation did you get? trying to do that research up the chain? >> from our perspective the law enforcement in the people around us were supportive. >> they were unable to help you go to theup the chain and find out who made the product. >> right. >> you testified about how potent it is, even if it is just as through the skin. what harm could the substance to have dispersed

over crowd of people? >> kill them. i'm not a scientist obviously. we have much smarter people than myself on our staff that are. it will depress your respiration and cause death. >> as was talked about, a miniscule amount. one of the challenges obviously, but they could be taking fennel and not realize it an overdose. my brothers and sisters in law enforcement, 1st responders, and within the dea, it is a very, very difficult situation. every time you encounter heroin you have to assume it's fennel. that is something the law enforcement all of the country and ems, firefighters, everyone is concerned with it.

>> heroin is cut with that in order to increase the addictive nature? >> increases potency. people go back to it. >> that is kind of the tragic part of it. word gets out it is strong, and traffic rules to have traffickers will do that. it will spike something hot so you the wild overdose deaths and verbal travel. there will be a desire for that product. it is mixed with heroin, other substances and really can be mixed with anything just to kind of expanded in its commercial viability. >> adding that to some other products, as dangerous as in our products might be, adding that to it is almost tantamount to knowing you'll be committing a certain amount of murders as it is distributed amongst the populace. >> that is unavoidable.

a significant quantity in the hands of the population can result in a certain number of deaths. >> yes. >> we have had success with this -- death investigation overdoses. >> how difficult is it to prosecute? >> you are speaking earlier. the biggest chalnges reactive. our success has been with the proactive infiltration to get them indicted, convicted, arrest them. the problem is the home has already occurred and you are trying to rebuild it. it is challenging when the substances are not schedule one substances. >> thank you. my time has expired. >> this concludes today's hearing.hearing. thanks all of our distinguished witnesses for attending.

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is. [inaudible conversations] announcer: on newsmakers, discussing the defense authorization bill passed by the house this weekend soon to be taken up by the senate. newsmakers today at 10:00 a.m. and 6:00 p.m. eastern on c-span. announcer: tonight on q&a, michael kinsley talks about his new book, "old-age, a beginner's guide, on living with parkinson's disease." >> what i really meant, thinking -- is it

going to affect my thinking? and thinking is how iron my living. so that became pretty important. and i asked this droll just what's going to happen. and he is says -- he was trying to tell me it wasn't such a big deal. edge,d you may lose your as if that was just nothing. and i thought, jeez, my edge is how i earn a living. it's why i have my friends. maybe why i have my wife. announcer: tonight at 8:00 eastern and pacific on c-span's a." and a -- "q and announcer: for the past few years, crops have been weekend. system.e farm credit

it is two and a half hours. >> i call this hearing of the senate committee on agriculture, nutrition and for street to order. thank you all for coming. today's hearing will examine the overall climate of credit in rural america. the health of agnes in a from both of and credit system perspectives and what the impact the current credit environment is having on our nations farms. we will also examine whether they farm credit administration is emphasizing appropriate oversight of the farm credit is to. all across ranchers the country are expressing difficult economic conditions as they farm sector profitability is forecast to decline for the

third straight year. alone,e past three years net farm income is expected to .ecline by 56% as our nation's farmers and rural communities continue to deal with low commodity prices and always elevated input costs, access to affordable credit in rural america is absolutely crucial. and always elevated input costs, access to affordable credit in rural america is absolutely crucial. the spring 2016 agriculture lenders survey released by kansas state university's department of agriculture economics expects the credit environment for farmers to remain difficult for at least a few more years. lenders indicate the demand for operating loans will continue to remain high as liquidity cash

flow are problematic for many farmers. for the nonperforming loans have increased and are expected to continue in this unfortunate trajectory due to low commodity prices. in addition to the lenders survey the federal reserve bank of kansas city painted a bleak picture. lenders know increasing share of farmers caring outstanding debt from previous years with an increased demand for loans and weakening repayment rates. now for farmers every year, every year so high-stakes bet is they put their confidence in their cross livestock in the business decisions they make all throughout the year while farmers continue to manage their the risk through period a low commodity prices and stubbornly high input prices. it is vitally important we began discussions regarding next year's borrowing decisions. there is no doubt that today's discussions are timely

especially considering it's been just under a decade, 10 years since we have had representatives from either the banking industry or the farm credit system before this committee to discuss some of the issues we will cover today. rural america relies on a network of credit providers assisting in the private sector and the farm credit system. created under the federal ormand act of 1960 the farm credit system is a nationwide system of privately-owned cooperative lenders statutorily required to provide farmers and other burr borrowers with the permanent affordable source of credit. currently the farm credit system is comprised of 74 agricultural credit associations in four regional banks which provide the ag credit associations with funds to make loans to producers and other retail borrowers pay the agency tasked with

regulating the farm credit system is the farm credit system administration or the sca. the farm credit administration is an independent agency comprised of a three-member board nominated by the president and his we all know on this committee confirmed by the senate through our committee. like the banking industry the farm credit system is not a lender of last resort. a lender of last resort for farmers who are otherwise unable to secure private financing is the department of agriculture's farm service agency are commercial banks and the farm credit system often relies on usda farm loan guarantees to make loans when borrowers are less creditworthy. now to date the farm service agency has seen a 21%, that's 21% increase in farm loans as compared to last year.

a further troubling indication of the struggling agricultural economy. obviously much as change since congress established the farm credit system 100 years ago. one thing that is not changed however is the importance of providing farmers and other rural borrowers easily accessible and affordable credit. i along with a few members of my colleagues on the ag committee here remember very well the difficult times for the farm economy during the 1980s. no one, no one wants to see a repeat of those dark days. i look forward to hearing from our two panels of witnesses regarding the landscape of the current economic conditions in farm country, what is working or needs improvement from a legislative perspective to protect financial well-being of our farmers and our rural communities. before we hear from our witnesses i recognize their distinguished ranking members

and senator stabenow for any opening remarks. >> thank you. >> thank you very much mr. chairman and thank you to our witnesses as well as leaders from the farm credit administration. great to see aalbue and mr. chairman this is a very important hearing so thank you for holding it. i want to especially welcome mr. tonsager in mr. hall unanimously approved last year. wonderful to see you again and i also want to give a warm welcome to jeb welder who served in the united states marine corps and the u.s. army and he and his wife are now the proud owners of trinity farms in greenville michigan. it's great to have you here today and thank you for your service to our country and for taking time away from planting corn to join us and tell your story. as many of us know 100 years ago the chairman said in 1916, is

passed the federal farm loan act to address the serious problems facing our farmers and agriculture producers a problem that threatens our rural economy. at that time obtaining reliable credit was often on affordable in most rural areas. many lenders avoided farm loans altogether because the inherent risk of weather and price swings made lending to farmers unappealing. as a result congress established of the farm credit system to fill the gap in credit and provide american farmers and producers the financing they needed to expand in good times and to weather the bad times. 100 years later the farm credit system continues to ensure that producers of all types and sizes have adequate and reliable access to credit. that farm credit lenders nationally provide more than $200 billion in loans to rural america. in my home state of michigan

greenstone farm credit provides more than $5 billion of loans to producers including two to more than 17,500 small new and beginning farmers that need access to capital. as we look here for mr. welder it was exactly this type of the support that helped him secure land and create a new life for himself and his family after his military service. however as we look ahead to the next several years we know we are in a period of low commodity crisis. especially compared to what we have seen in the past two years. which will make it more challenging to make in this meet. this year alone that farm increase is expected to decline for the third consecutive year drop of 56% from 2013 and thank goodness mr. chairman we did the farm bill. we continue to rely on commercial banks, usda and our are farm credit system to

provide the necessary short medium and long-term enhancing that will allow american agriculture to continue and prosper. i am please will be hearing today from our second panel who play an important role in providing credit throughout the entire supply chain. i would also like to briefly mention the support of the farm credit system by senator pat leahy. i understand he's in a pro-patience committee meeting and will be unable to attend today. mr. chairman as chair the committee during the 1990s when many important forms were made -- reforms are made senator leahy asked me to submit for the record transcript of his and ranking member lugar's floor statements during the consideration of one of those major changes and i would ask the chair to admitted into the record. >> without objection so ordered.

>> mr. chairman? could i welcome the south dakota witness? >> i would be delighted if he did that. >> dallas tonsager has a farm in south dakota and served as secretary for rural development usda and has had a great distinguished career in public service of thank you for being here and welcome to the committee. give your family are passed. thank you dallas. >> thank you senator. today i'm pleased to welcome our first panel of witnesses that represent the farm credit the honorable kenneth spearman. we appreciate your joining joining us while why your cover from a medical procedure that puts you under doctors orders to wear your chapeau. i think that's the proper term. i told you in the backroom i was going to give you a black cowboy hat, a cowboy hat as we say in

dodge city but we don't want this to be a hearing with black hats that you are permitted and you are looking good. mr. spearman appointed to serve on the farm credit system by president obama in october october 132009 and has an extensive background working in finance agriculture cooperatives from 1980 to 1991. mr. spearman served as a comptroller for the 100 million citrus co-op in orlando where he handled financial management report and supervision of staff accounts. after serving in his capacity mr. spearman went on to become director of the internal audit for florida's growers and served as an outside director on the ag first farm credit board until his appointment with the farm credit administration board. mr. spearman is also u.s. army and vietnam veteran and we thank

you sir for your service. mr. spearman thank you for your service to our country and we look forward to hearing your testimony today after i introduced her fellow board members. our next witness on this panel is the honorable dallas tonsager already introduced by my distinguished colleague. mr. tonsager brings decades of experience working on issues concerning farm credit in rural america and is now on his second stint serving on the board of farm credit administration. in addition to being a board member of the farm credit administration mr. tonsager serves as chairman of the florida farm credit system insurance corporation which is responsible for ensuring the timely payment in principle and in just some obligations issued on behalf of the farm credit banks. before being nominated by president obama to serve on the farm credit mezrich import mr. tonsager served as usda's undersecretary for rural development from 2009 through

2013 where he worked to expand broadband another critical infrastructure projects all throughout rural america. mr. tonsager hails from south dakota where he grew up on a dairy farm. it's great to have you back before the committee dallas and i look forward to your testimony. a third witness on the panel is the honorable jeffrey hall. mr. hall was confirmed by president obama and 2015. pride is a prime minister hall was present of association management and consulting firm he cofounded in 2009. the forward thing in the or mr. hall was the kentucky state executive director for usda's farm service agency where he was responsible for the farm program and farm loan program delivery and compliance. and was a scout for the university of kentucky's basketball team assigned or

stand. i made that up. prior to his time mr. hall served as assistant to the dean of agriculture at the university of kentucky professor served as a senior staff member to our majority leader mcconnell from 1988 to 1994. altogether he has enjoyed a 30-year career in that policy. thank you so much for joining us today. i look forward to hearing all three of your testimony today and asking questions about the state of the farm credit system. mr. spearman why do you kick things off. >> thank you mr. chairman. chairman roberts and ranking member stabenow and members of the committee it is a privilege to appear before you today to report on the mission of the farm credit administration. ever written statement to submit for the record. president obama appointed me to the board in october of 2009 and

designated me as chairman and ceo of march of last year. at the pleasure serving of serving on the board with two very distinguished colleagues dallas tonsager and jeff hall for whom you will hear from in a moment. sca is an associations and related entities of the farm credit system including -- our responsibility is to ensure that the system meets his congressional mission to provide a dependable source of credit for agriculture and rural america. fca was created by an executive order of president roosevelt in 1933. during the agricultural credit crisis of the 1980s this committee restructured fca giving it regulatory and enforcement powers similar to those of other federal financial regulators.

fca is not an appropriate agency we are funded primarily through assessments paid by system institutions. the farm credit system is the nation's oldest government-sponsored enterprise. it is a nationwide member of borrower owned cooperative financial institutions. currently the system includes four banks and 74 direct lending associations. the banks provide loan funds to association which in turn provide operating loans and long-term real estate loans to farmers, ranchers and other eligible borrowers. one of the system's banks also has the authority to lend to agricultural cooperatives and rural utilities. thanks and associations cannot take deposits. the system obtains funds by selling securities on the

national and international money markets. the securities are not guaranteed by the federal government. the system is the only gsp that makes loans at the retail level. it was established to provide a dependable source of competitive credit to farmers, ranchers and farm cooperatives. its mission is to serve american agriculture in good times and bad. and now after several years of record farm income the agricultural industry has entered a new period of lower profits. in 2016.farm income is forecast to decline for the third straight year. times like this underscore our nation's need for dependable affordable agricultural credit. because congress had the foresight to establish the farm credit system 100 years ago our farmers and ranchers have been able to provide abundant

affordable food and fiber to people at home and around the world. of course stress on the farm industry can create stress for the farm system and we are already seeing signs of stress in a few institutions. however i'm happy to report the system banks and associations are fundamentally safe and sound as is farmer and fca's taking steps to make sure the system remains safe and sound. the board recently finalized a rule that updates capital regulations and aligns them with the basel iii accord. we continue to emphasize robust internal controls and all system institutions and to monitor for emerging risks. regarding the system authority we have taken steps to ensure that it uses this authority only for the purpose of mitigating risk and is always if we find a

transaction that's outside the limits and the purpose of the law we require the institution to take corrective action. we also emphasize the system must serve all eligible credit worth the potential borrowers regardless of race or gender and regardless of the commodities they produce or the size of their operations. we want to make sure the system also serves small organizations and operations that produce organic and value-added boost for local markets. mr. chairman this concludes my opening statement. thank you and i will be happy to answer any questions. >> mr. tonsager. >> chairman roberts and ranking member stabenow and members of the committee thank you for the

opportunity to testify today. i'm pleased to now be serving his second term on the board of the farm credit administration with my distinguished colleagues chairman spearman and board member hall. i've previously served on the fca board from 2,042,009. the outset i want the committee to know of my absolute commitment to the continued safety and soundness of the farm credit system as we navigate through the downward cycle in the agricultural economy. rural america and the farm credit system are important to me both as a role as a board member and my personal connection to farming and rural america as i was raised on a farm in south dakota and was engaged in farming for over 40 years. the farm credit system which is quite the fam by farmers and ranchers was well-positioned to persist through the 2008 financial crisis. that the system's capital and liquidity positions risk profile stress testing capacity and lending practices and agriculture sector have all

significantly strengthened over the last eight years. with the challenges now facing the agriculture of economy at ca's oversight role and the farm credit system's purpose to be there for a culture of our more critical than ever. i live to the difficult years in agriculture in the 1980s and will understand the importance of the farm credit system to farmers and ranchers in such times. i have great confidence in the ability to ensure that the farm credit system institutions remain a source of sound adequate and constructive credit to those farmers and ranchers struggling to keep their ad operations going and remain in the rural communities. in addition to my duties as a farm credit administration board member i served as chairman on the farm credit system corp. along with my colleagues on the fca bar. congress created the insurance corporation to ensure the timely payment of principle and interest on the debt issued by

the farm credit bank. congress also gave insures for prisoners possibly to provide assistance to troubled farm credit system institutions and to act as a conservator or receiver for failed system institutions. five off the insurance fund must remain a secure base equivalent 2%% of adjusted insured observations of the system banks and there are currently $4.1 billion in the insurance fund. an amount that is marjuan to the secure base amount. this fund acts as a safety net for the farmer and rancher owners in addition to the protections afforded by several liabilities agreements in the system banks. that was my opening statement. thank you to the committee and i look forward to your questions. >> mr. hall. >> thank you mr. chairman recommender stabenow members of the committee. my name is jeff hall and it was a year ago that i set up for this committee and i appreciate your confidence in appointing me

and i appreciate the chance to come back as a member of the farm credit administration. farm credit messerschmitts a regulator of the farm credit system and farmer mac printer agents examine system agents examine systems editions for safety and soundness in compliance with laws and regulations that fca exercise and increased oversight with institutions in a higher risk to the farm credit system was created to provide a permanent reliable source of credit to u.s. agriculture. when congress enacted the farm on act in 1916 credit was not always available and affordable in some rural areas. many lenders avoided pharmaceutically inherent production and price risk of agriculture. the foundation of the farm credit system is a corporate structure. agriculture is change many ways and will continue to change that the guiding principles of the cooperative model continue to stand the test of time. member ownership and governance are key ingredients of the system's success. as chairman scrivener ported the farm credit system is safe and

sound. the system today is due in no small part to the actions of this committee. during agriculture credit crisis of the 1980s commerce made very important changes to the farm credit system that gave us the opportunity to emerge stronger and better pull the server america and its mission. as you well know farming comes comes -- is projected to climb virtually all sectors of commodity prices are lower than anytime in the past five years. our deck into sync reason many farmers and i'd assess a seven force to draw from the equity that though. fortunately agriculture center this downcycle from position of strength with historically low interest rates helping to hold down debt levels. there are challenges ahead on the farm credit system but is well situated to remain a reliable source of credit. chairman roberts told me as i sat at this table year ago outside of washington and the people in the system. i prioritize my travel to meet with borrowers is a shame bores employees dealing with these

challenges on a daily basis trade-offs on my visits i learned about the consequences of the rules and make nations imposed at the farm credit administration did my visits have helped me greatly in my role as a board member. without input from the regulator my job would be much more difficult. would like to say we don't issa group that i will always listen. at our march board meeting the farm credit administration board approved a capital world which will require the system hold onto more and higher quality capital. by raising the cap on permits farmers investments and their associations is better protected from impairment. the farm credit administration board adopted guidance to the system on these of similar entity lending activity. understand the reputation is a valid concern and adopting this guidance will increase the examination reporting requirements. gives fca a tool to monitor activity. also gives us an indication of whether additional guidance is necessary.

the a role in similar entity guns are good examples of the additional focus on internal controls create the beginning of my term chairman spearman has made internal controls is dated to party. modern agriculture in the financial service industry is more complex than ever. the farm credit administration in the system strengthening internal controls in order to mean your confidence and carry on the list as a service to american agricultural in rural macy's. thank again for inviting me to testify. having been a federal land bank or were in the 1980s i can say with confidence the system is much better and stronger than it was 30 years ago. i'm consider myself an advocate to the farm credit system. you consider it my responsibility to ensure a safe and sound source of credit to all of civil borrowers and donors of the cooperative. the agency is doing his job as a regulator and the benefits of dependable competitive source of credit while offering prosperity to rural america. thank you mr. chairman.

>> thank you all again for appearing today before a committee and for your statements. mr. spearman the reports i cited in my opening statement by the kansas city university paint a very bleak economic picture for farmers around the country. i don't like saying that and you probably don't like agreeing to it. now i served in congress in the 1980s and during the last farm crisis and i'm confident that nobody, nobody wants to see a repeat of those tough times. today what are the conditions of the farm economy and how do they differ from those 35 years ago? i am hopeful they show we are not headed for another crisis and even more importantly what safeguards are in place to ensure our farmers are protected in a band we see two, three, four, five more years. i hope not but if that is the

case of low commodity prices? >> mr. chairman thank you for the question. i had to push the right button here. the farm credit system as the three of us all stated is well capitalized at this time. it is well positioned if you will to withstand the possible downturns in the economy, agriculture, the -- commodity they are looming. the capital position is for a strong. there is 16% f. you will with 48 early in dollars or so roughly in capital. the asset decisions are strong in the system. the managements that are

currently at the institutions are, i don't want to say a lot that are but they are more informed today than they were in the 1980s. the earnings work very well the system. as you can see from our financial statements, the liquidity ratios are over the top. in fact they are more than twice what the regulations require of 90 days so i think that the system is well positioned again to withstand any downturn. of course there could possibly be some black swans out there that we are not aware of that we have systems in place at the agency to keep us abreast of what those might be and as an agency we will take measures

that will end up protecting the system more. >> i appreciate that mr. spearman. mr. tonsager. your role as chairman of farm credit system is to ensure farm credit funds in order to safeguard the timely payment of danceable and adjust on the debt issued by the system banks. this funding comes from a collective of premiums and system banks that issue noted in your written testimony and 2013 when times are pretty good, the farm credit system insurance corporation and the federal financing banks entered into a 10 billion-dollar line of credit please explain what financial conditions prompted this decision when we were in a much better situation and what authority exists allowing the insurance corporation to take

out this line of credit? >> the line of credit can only be used in times of economic emergency for the united states in general, not for agriculture specifically. it is a liquidity line designed to ensure the flow of capital to the farm credit system should there be an event similar to 2008 that might occur again. so we simply cannot use it unless the federal funding bank agrees with us. it cannot be used in the event that the system fails properly manage itself. you can only be used in those economic emergency occasions. similar lines of reddit are available to the fdic and the national credit union administration, so the agency at that time after watching what occurred in the 2008 timeframe

made this line of credit available and to have it there to assist us should there be a liquidity event within the markets. >> that was not only prudent but a profit during these rather bleak times weren't you? i appreciate that. let me ask a question of the full panel so anybody is welcome to answer. don't be bashful. one of the main criticisms we care about the farm credit administration is that fca oversight of system lenders who loans is not thorough enough, the loans are being approved that fall outside of the system's charter or scope. how do you respond to that criticism and furthermore how does the farm credit administration actually do its predatory duties to ensure system members are able to serve farmers but in a way that provides for the statute?

feel free. >> mr. chairman the committee you are referring to is the lending process will that the system is involved in. this was a practice that was included in the act in 1992 as a risk mitigator. one of the primary criteria for participating in that robe ram is that an eligible loans that are functionally similar. there are limits to be well on what they participation the institutions can involve themselves in these types of loans and the agency drafted and approved a book letter to provide guidelines for the

system, to actually update their procedures and get more of approval from the board on any of these loans that are entered into and the book letter also dressed the possible reputation of risk involving themselves in these types of loans. >> i appreciate that. mr. hall. in your testimony talked about capital rules recently approved by the farm credit administration board this last march. just a couple of weeks ago. can you expand a little further on this rationale for approving it and explain what you hope to accomplish? >> the primary goal is to make the system more comparable to other banking institutions. our money comes from wall street

and when you have common terms and common factors that people on wall street look at buying the systems paper this comparability was an important step. cipro brand that i think the agency has been involved in for three or four years pores -- proposing rules ended march we were able to actually approve the board and the board approved the adoption of that role. >> i appreciate that. senator stabenow. >> thank you very much mr. chairman and again thank you to all of you eye wonder if you might just expand a little bit because i'm sure we are going to hear more about similar entity authority and some of the high-profile cases that there have been concerns raised about. if you could expand a little bit on steps you've taken to address that and again how this mitigates risk from your perspective and any of you are

welcome to answer that. mr. spearman? >> i will start senator, thank you. as i mentioned previously some of the steps that have been taken have been to raise or heighten if you will awareness that these types of loans made create controversy. the act does permit fees types of loans is a risk mitigator and the way that it does is that the system is a monoline lender if you will so they have two be there for agriculture in good times and bad. the guidelines that we have put out in our book letter is that the board needs to be more involved in these types of loans

and the policies and procedures are examined by our examiners to make sure that they have been updated and that's the institutions are keenly aware if you will that these are controversial type loans. >> would anyone else like to respond? >> thank you senator. i would just like to mention congress over the years has provided several elements within the farm credit act that require eggs and the farm credit system to work together and this is one of those elements. for every dollar that is invested in similar and the loan there's a dollar from a private banker. these loans cannot be done without a private tanker involved with it and there has to be at least a 50% involvement by another party other than the farm credit system. so i believe there has been some

misunderstanding about these kinds of loans. they have been authorized for many, many years. they include, co-banks perspective they can do utility loans, communication was in several types alone so you are not only robbing the capacity by having these loans to strengthen the relationship bankers in this particular area and other areas. there are literally billions and billions of dollars together with the banking community each year with thousands of transactions between the farm credit system and banking. >> mr. hall that you want to add anything? >> the only thing i would add is the reason behind similar entity lending and back in the 90s was that allow the institutions that base of risk so they are functionally similar. they're not eligible loans so i think that is where some of the confusion comes in but i think we have monitored as an agency

the activity. we have asked for additional oversight of data and we will continue to monitor the agency to make sure it's proper and appropriate. >> thank you. changing a little bit to a different area of concern in terms of risk and agriculture that is the decline in the total number of farms which is certainly something that we are all concerned about. according to the fda from 2014 to 2015 united states lost more than 18,000 farms and over 1 million acres of farmland. i'm wondering if you would respond to me. the trend in the average age of the american farmer as in all of our areas in the economy, the average age is 58 years old. i wonder if you might speak and describe some of the work that you're institutions are doing to support new and beginning farmers which are very important obviously to all of us.

mr. spearman. >> thank you senator for that question. the wide program that you alluded to us a program that was added to the act in the early 1980s and it was added with the purpose of providing a vehicle to bring more young, more beginning if you will and small farmers into the agricultural sector. some of the provisions are provided under that act in that part of the act is that there could be lesser interest rates charged if you will in the underwriting process. education is provided for those folks who are not very familiar with some of the operations of

agriculture and also we have passed a book letter if you will that encouraged farmers who borrow from the system to be more involved with with the youth aspect of farming. and the lenders, the book letter or dresses the fact that the systems who lend the money actually survey bear territory and make sure that they are addressing underserved folks within the territories. >> thank you. would anyone else like to respond the new beginning farmers? >> i think it's been for the systems mission it's been a success story to look at the data that has been accumulated

regarding the growth in those loans in those areas and i think the system has taken very seriously and my discussions with them their requirement to do this and they have taken it to heart and aggressively pursue this program. they each have their own individual programs designed for their region. we examined for them to execute those programs. the report is given to us each year and we in turn report to congress each year about the results of that effort. >> mr. hall did you want to add anything? >> one comment two day summit previous experience working with the agency their partnerships on guaranteed programs that are available. i know the system is very active in working with other partners in making sure the best population assert. >> thank you mr. chairman. >> senator tell us. >> thank you mr. chair.

i'm going to maybe ask a different question. first off i'm from north carolina and we have a highly diverse farming community and some are doing well right now and others are not doing so well. i just want to add that we need to be careful. we could see greater numbers of farmers harmed over time if we don't get things on track and what i want to do is talk about some of the future risks. it may seem odd asking this panel about gmos but are your people looking ahead and saying for example we have got a discussion right now about gmos here. we don't fix fix it than peoplee kellogg's and campbell's in a number of the major producers of food are going to start reformulating. over the course of the next few year sugar beets well and being an input for sugar as they grow

cane sugar. over 90% of the corn grown in as states is a product of jama. i don't know what campbell's is going to to do or play set in their soups. the same thing to a certain extent with white potatoes. i am from north carolina and 50% of all the sweet potatoes grown in the united states are grown in north carolina and 70% of the exports are from north carolina and none of them are product of gmos ice and campbell's will decide to replace white potatoes with sweet potatoes. it would be good for me, not necessarily good for the potato rowing states but the point i'm making it if this represents a major risk in terms of demand over the very near future have you all looked at that in terms of your portfolios to get any idea of what it means if you completely shut the demand down for certain commodities they sugar beets? >> senator a very good question. what we do as a safety and

soundness regulator is to try and examine all risks. we do have economists on staff who report to us regularly. >> have they done analysis on the particular policy if congress doesn't act the near immediate and long-term effect it will have on commodity producers? >> they analyze all risks within the system, some known in some unknown to others. >> would it be possible for my staff to get in touch with you to what extent they recognize the impact and what will happen among the campbell's and the kellogg's and major food producers. they will reformulate. they will increase demand and will we see it in our capacity for cane sugar so instead of sourcing sugar beets run an ad that the united states they will soar sugar from other parts of the world. the world finds sourcing inputs and it seems to me that we'll

have that devastating impact on commodity prices. it must recognize this reformulation starting right now it will start on steroids in july and august timeframe and it's not one of these five or 10 year market disruptions. this is probably a one or two-year market disruption so i'd be interested in getting any analysis on that -- how that would affect the portfolio of farmers in the process of these target commodities. there's no question my minded major food producers those put that put cans and boxes on the shelves are going to reformulate to the maximum extent that they can and when you are talking about commodities that are in the 90 percentile in terms of gmo products and safe products i might add according to the fda the department of agriculture and the epa, what are they going to do? who are they going to sell that to them if they do sell it to

what extent does this affect a portfolio at financial portfolio in terms of their ability to pay their bills? you probably didn't expect to get that question when i came into the room i didn't expect to ask a question but that's an example of risk that are dependent on congressional action or inaction and i think it's something to look at. that's a potential looming crisis for some of the farmers out there. i will say if i maybe will follow-up with questions to the agency so we can get specific information on how this could teach stabilizing to the sugar beat growing states that corn growing states the potato growing states in the soybean growing states. it's an equal opportunity disruptor and i think we need to get financial information behind it. >> thank you mr. chair. >> let me say before i recognize senator bennett on behalf of the distinguished ranking member.

the responsibility and requirement that mr. tillis is raised with regard to agriculture by a technology. nokia difference is supposed to gmo. this is called agriculture biotechnology, abt. it's a good question and it's a challenge that the farm credit system ought to be thinking about as well as every lender that we have at our disposal within the world of agriculture. that responsibility is right here in this committee and also in the senate of the united states. the house has acted. we will act. the distinguished ranking member myself and staff have been working overtime to try to come to an agreement to bring to the floor where we could get 60 votes. i think mr. tillis admonition is

a very good one especially chair of her body in the farm fields. reformulation is a pretty fancy word for we need to buy what you're selling and that is happening today as we speak for the sugar beat producers. so we know that we must t and everybody on this committee knows that we must act. i know that mr. tillis has raised a very important point. seen it mr. chair by may we need to put a face on who is affected by this policy and its farmers. it's farmers that are are ready have crops in the ground. they have plants in the ground. next year the big businesses will find out when they can buy to avoid what i think is still applies policy and the first evidence of this in vermont. they will be able to make the change because they have the

resources and the reach to do it. the farmers don't. thank you mr. chair. >> senator bennett. >> thank you mr. chair and thanks for holding this hearing and i wish you and the ranking member while. negotiation time is not on our side. i want to thank the witnesses for being here today and for your prudent oversight of the fca. mr. chairman you said the mission of the fca is to serve farmers and ranchers in good times and bad times. farmers and ranchers across the country are facing financial hardships. producers are bringing in less revenue but their overall cost requirement increases year-over-year and are forecast to increase next year as well. on top of that persistent drought conditions and extra volatility which makes it clear to me that farmers need all available options when it comes to lending and the farm credit system and designed to mitigate

against these fluctuations -- fluctuations. i wonder what they could describe the role of the farm credit system particularly in tough economic times and what role it plays in rural communities facing these economic hardships. i'd be happy to hear anybody on the panel address it. >> thank you senator. the obligation i think was made clear to us in 1980s and the struggling times we had in that time that there needs to be a level of strength and commitment and in rural america these are farmer on corporatists. these word members are extremely committed to their communities and that's number one that the sick governance that occurs within them. i think the system as has not the geisha and to make sure the system remains safe and sound. that is a reliable lender through that time but also an obligation to make sure to work closely with producers and i

think they have developed a pretty good strength in their loan officers working with the clients and how they make sure they get the best opportunity for finance. i think financial strength of system and the capacity of the system and their lending working with producers is going to make a lot of difference. in the 80s we saw a lot of producers that simply couldn't get the credit they needed at the time or at they were overextending credits other income was replaced by credit and they lost ground. i think one of the critical elements of this is how loan officers in the farm credit system in the private sector work with those individuals producers and fund them if they possibly can or help work with them if it becomes too challenging. it's a tough, tough thing. the time we lost thousands of producers and many of them were fundamentally personally harmed in the process.

additionally what i could add there are rights involved with this a lot requires the farm credit system provide rights to borrowers in the event there were closed on and so by law are process must be followed with individuals producers in the time comes to make decisions about their credit rates thank you for that thorough answer. i will ask a second question. last year colorado producers exported more than $1.8 billion in farm goods to countries around the world. some farm credit institutions like cho bank headquartered in colorado exports to support producers to say look to markets abroad. can you talk about the growth that we are seeing an export financing and ag in this country? ..

>> >> different groups that may

be getting funding or other minority groups are there certain areas that you target or would like to see more participation whether women or farmers or ranchers could you delve into that a little bit lacking in veterans are others who want to get into farming or ranching that we can express to our constituents? >> the program that provides an excellent entrance into non traditional agriculture was structured for young beginning in small bowl so with the diversity inclusion rule we passed a couple years ago where we requested

and mandated the institutions will get the system the area that they operate in the district because the mission is to serve all qualified creditworthy folks. the system is doing that we are examining for and we're seeing a lot more improvement particularly with the veterans area. >> i appreciate that. >> we have been girding itself traveling together and we have great experience from them.

>> i was at texas a few months ago with a young veteran who didn't have much agriculture experience but and was complimentary of the support he has received and other educational programs available and even in kentucky l ladies to be an employee in the system she and her husband are in full the locally grown community supported agriculture to be recognized as a woman of the year. >> i appreciate your work with veterans who might have challenges. >> prenup and interesting perspective but that does

create a wrinkle out there if you're talking about other natural disasters with the outlook of the agriculture economy over the next several years what steps can you take with the credit system to prepare for that? explain how that works. as an mentioned previously as we tried to anticipate and examine all risks in their risk-based. looking at the problems that

may be on the horizon. if those situations are going to the board if they are reacting whether a drought or another crisis you might see? >> it is not fast enough for me personally but we do try to plan and see if we can help the system do a better job to help those distressed areas. >> my time is expired. >> senator casey. >> thanks for your testimony

in the answer that you gave for the young and small farmers i also want to raise the question about the new risks and challenges that we face in light of what happened in the '80s that you have losses from that you can apply to have to assume that because of technological innovations both the technology based those lessons may not apply in light of that had to face

those risks going forward that limits the technology based on the other challenges from the old 1980's problems that they make a determination with the greatest exposure is maybe in their concentrated in that area. with those cyberthreats that our apparent in almost all sectors of our economy. one part is to spend time in

the information technology area ended issues are found corrective action is mandated. >> when you encounter those pleas bring those to our attention and ask for resources where appropriate. also we want to raise a question regarding when you assess that credit stress level those portfolios will within risk, in light of that but also when you reference the dairy product in grain prices is a false

and that you will experience if you just pinpoint the best you can in 2017 with full repayment. >> when you make determinations for what's going to be anticipated for those energies that will be examined and because of those payback abilities to have a deleterious effect on an institution. if we see an area of stress

that would indicate to the institution and to look at the underwriting for something they are overlooking. >> thanks very much. >>, if you would answer this as we have heard a discussion how is that farm credit to ensure access what is the state of that insurance fund and how much of that is sufficient and share your thoughts about

that. >> start with those lessons learned in the eighties coming out of the '70s there were very highly leveraged and after that the amount of debt leverage was automatically reduced so that is the big difference coming into the current circumstance with $50 billion of capital and celebrating $250 billion worth of loans. that total leverage comes and that ability how they borrow money it was

different than previously lot of relationships lending in to watch that as and has devolved the obliterating is excellent with no allowances for losses at this point that can change quickly as we go into the coming year so it is necessary to look for that. and to see how hard repressive system with the safety and soundness of the system were the producers and diligently watch the situation in working with producers to america if we

learned anything it is important of capital with the farm credit with the increasing interest with the city that i live in with locally grown food and in urban areas it is increasingly viable in what do we do to ensure those on to dash -- the nontraditional farmers have access? >> a very good question i initially met senator stabbed now in detroit i was at a convention that where

your expanding up by to be more directly involved and i saw a young former bear with a little garden with us sierras program in the major customers is whole foods. edison the hold dear and der

>> just to add a couple comments that we examine to that many have local food core nader's although we are looking at the marketing service to provide a lot of resources to those co-ops want to establish that market to make sure there is a flow of product. >> but my city of cleveland but today it is under 400 and there are lots of opportunities that people

are taking advantage of with the restaurants that want to source locally so just ask all three to always be aware edits it is a relatively small part of your portfolio but a crucial area for what all three of you believe in. >> i guess i'm the only one at the table now. [laughter] >> even though the chairman is not here it is very good for all of us to say it is the appropriate oversight hearing to have banned in particular with regulators to reinforce the rules and regulations designed to preserve for agriculture am

particularly this hearing is appropriate maybe not all agriculture products but at least in iowa with the production of those so we count on people like you to keep the system sound. i will ask anyone if you, how detailed are a the audits? does that farm credit randomly pick different portfolios to see what is reported matches up with the actual risk? morrison that the 30,000-foot level looking at final projections?

>> a good question for a regulator off the top of my head their primary focus examination is risk-based if this system could be in more jeopardy each institution is examined once every 18 months but those can be it on going all year. so the banker reseeded most risk is once a year so these reports are issued once a year so that is the approach >> have like to add they

take years of training the dad comments from each institution's we have an ongoing look at the system each by statute must be done every 18 months we have sat down to go down with an examiner what they go through that examination process he reports to the board's of directors to make sure the boards of directors are well aware so it is very thorough. >> so is it assumed that you do pick different portfolios to see what is the reported matches up for risk? >> it is a rand of its plant

>> has the farm credit administration never required in institution to divest of what was inappropriate to the farm credit system? >> yes, sir, it has a have been instances that there has been taken corrective action to divest and economic you specifics but it has. >> farm credit lenders but for those teetoo watch one has an on-line advertisement to earn interest without tying appear funds to go on

line and use a phone contrary to cds so could you explain to me any different from checking or savings accounts they seem to function the way it is marketed. >> these are not checking accounts this particular procedure is under the act to draft accounts to put in a fund to pay down there loans.

>> that lead people to believe that. >> they're not insured by the fdic that allows producers of long-term credits. >> i have asked the questions. >> in case we don't get back for the other and then to ask the couple of questions.

>> thanks to all of you. with loan guarantees with canadian farm banks in each of those lenders provide 40% rather financing and often working together but yeah farm credit and that we have an unfair advantage with how that is handled so can you explain what is happening?

>> and if it is a full-time farmer cp can win for all credit needs so we have had some cases where farmers may choose to put up another business and they are allowed a statute so it appears as if we are lending directly to those businesses but that is one key element. >> one thing that is true with agriculture the price of commodities is changing so that they can safely use those options and also to provide credit is

complicated 10 years ago grey and operator elevators were facing big margin calls and two years ago we saw price volatility resulting in the margin calls of 350 million. >> the system was able to help address that challenge to fund several million dollars in with those grain elevators. >> is that what the farm credit system is to handle the agricultural markets and how is that current situation similar to 2007

and 2008? >> there are a lot of similarities to make sure they're prepared in more periods of volatility between now and then is the cost of money bet the farm income will pay off debt. and the interest rates to work their way through it. i'll see a comparison to the 80s but there is volatility a bigger challenges for the producers for a says examiners and regulators. >> would you like to add anything? >> the system is well positioned with the strong

liquidity end is a lot different during the '80s with the unfavorable underwriting with loose standards and to date it cannot happen. that is a lot more favorable a lot more going on today that did not exist at that time. >> in those reforms came about in there is a reason to make more reforms.

>> and as a result of structuring is much more persistent and it was an important tool of the system to make sure there is plenty of capital. >>. >> thanks for your questions that concludes a force -- the first portion and with the farm credit administration to show with the assessment is sound and operating within the statute

into my fellow members and by may 26 please answer all questions we will now like to invite the second panel to come to the announcer: this weekend, we will discover hattiesburg. diary entries to tell the story in the civil war through the eyes of the soldiers and families and how important keeping in touch was for those on the battlefield and their family members back home.

>> because so many women were writing to their women at the front saying, i don't know exactly what you are fighting for my but you need to come home because we have about a fifth of the crop that we normally do. youngest ind our the back and we are not going to have anything left. to home. announcer: and we will examine the vietnam war in the 1967 experiences of charlie company, discussing the battlefields of vietnam. >> the nonveterans have been used as political footballs, as part of a morality play. they have been used as many things. the hardly anybody has gotten to tell their story. who they were as young men before they went. the trauma of war they went through. it's funny times, it's horrible times. and what happened to them as a generation since they've been home. announcer: in american history tv, the 19 city six flying up vernon dahmer at the hands of

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announcer: superintendents and scholars justified on implementing the every student succeeds act. witnesses voice concern about provisions and -- in high poverty schools. this is just over two hours. >> the senate committee on health committee and education. we will each have an opening statement and then we will introduce our witnesses and senators will have five minutes for westerns each. i am delighted to have the witnesses here. this is an extraordinary group of individuals with a broad prescriptive -- perspective about tilden and education. we welcome your comments on how we implement the new reauthorization of the elementary secondary education

act. this is our third of six hearings to discuss the implementation of the every student succeeds act, which is the president decided december. it is the second opportunity for this committed to hear from the states, school districts, teachers and others to help us pass this overwhelmingly bipartisan law and working together to implement it in a way that is consistent with congressional intent here and i want to focus my remarks on the administration's proposed supplement not supplant regulation. this is the first opportunity the regular she has the right -- the administration has the right regulations. in my view, it rates an f.